Selling Price Formula

Selling Price Formula in Maths

We experience different situations every day when we need to calculate or compare things. Especially situations involving the sale or purchase of goods. The selling price is used to sell the item at a certain cost and can be calculated using the selling price formula. The amount that the buyer pays to buy the product is called the selling price. The actual selling price is the price the buyer pays to buy a product or service. This is the price that is higher than the cost of goods and includes a profit percentage. If the seller wishes, they can also keep the selling price similar to the cost price, if the buyer does not wish to gain profit. Determining the selling price is a very sensitive issue because sales of a product are largely based on it. We can calculate the selling price in various ways and formulas. 


The Basic Formula

SP = CP + Profit


Where,

SP= Selling Price

CP= Cost Price


This chapter deals with selling price and its role in calculating the percentage of profit and loss. We also learn the difference between selling price and marked price. We also learn how to calculate the selling price of a product using different formulas. There are various examples that will help us understand better about the selling price of an object. 

 

Important Selling Price Formula

  1. Selling price = Cost Price + Profit

  2. Selling price = Marked/List price – Discount

  3. Selling price = (100+%Profit)/100 × Cost price

  4. Selling price = (100− % Los)/100 × Cost price


Other Important Formulas Related To Selling Price

Element

Formula

Cost price

Selling price – Profit

Profit

Selling price – Cost Price

Loss

Cost Price – Selling Price

% Profit

Profit/Cost Price × 100

% Loss

Loss/Cost Price × 100


Selling Price Vs. Marked Price

Marked price also known as the list price is the price that a seller spells out to the purchaser while selling price is the price that the seller actually receives from the buyer after a bargain or making a deal. In general, the selling price is lower than the marked price. However, sometimes the selling price and the marked price can be the same also. A fixed price shop, meaning that the shopkeeper that does not offer any discount or price cut of any sort is an example of it.


Calculate Selling Price Per Unit

Following is the step-by-step procedure to calculate the selling price per unit:

  • Identify the total cost of all units being bought

  •  Divide the total cost by the number of units bought to obtain the cost price.

  • Use the selling price formula to find out the final price i.e.: SP = CP + Profit Margin

  • Margin will then be added to the cost of the commodity in order to identify the appropriate pricing.

Thus, the selling price per unit formula to find the price per unit from the income statement, divide sales by the number of units or quantity sold to identify the price per unit.


For example, given sales of $80,000 for the year and 2,000 units sold, the price per unit is Rs.40 (80,000 divided by 2,000).


How to Calculate Cost-Plus Pricing

Markup is the amount of difference between an item’s cost and its selling price. Usually, depending on the industry type, it is demonstrated as a percentage of the cost.

Margin also referred to as Gross Profit) = Selling price – Cost of goods sold (COGS).


Margin and Markup move in tandem. For example, a 40% markup is always equivalent to a profit margin of 28.6%, while a 50% markup is always equivalent to a margin value of 33%.


Cost Price

Cost price is actually the ultimate price at which the seller buys the product or service. He then adds a percentage of profit to it. The list price or marked price is the price which a seller fixes after adding the needed percentage of profit.


Solved Examples

Example: Maria marks all her products 30% above the cost price and offers a discount of 5% on the marked price. She is of the viewpoint that she will earn a profit of 20%. What do you think is the percentage of the profit she earns?

Solution:

Let the cost price of the products be 100.

Thus, the list price/marked price will be = ₹100 + 30% of the cost price.

= 100 + 30

= 130

Now, the Selling price = List/Marked price – Discount

= 130 – 5% of 130 = 130 – 6.5

= 123.5

Therefore, the profit = SP-CP

= 123.5 – 100 = 23.5

Hence, the percentage of profit she earned is below 20%.


Example: A new retailer in the market marked all his goods at 50% above the cost price thinking that he will still earn a profit percent of 25%, offering a discount of 25% on the list price. Find out his actual profit on the sales?

Solution: 

Let the cost price = Rs. 100

Then, list price = Rs. 150

 Thus, Selling Price = 75% of Rs. 150 

= Rs. 112.50. 

Hence we can conclude that the profit % he earned = 12.50%. 


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FAQs (Frequently Asked Questions)

1.What is the Significance of a Selling Price?

The selling price is the price that the buyer pays to buy a product or goods. This is a price above cost and includes a profit ratio. Cost of goods is the price at which the seller buys the product or products. You then add up a percentage of your profit or gain. The set price or list price is the price that the seller will determine after adding the desired profit percentage. The price listed is the price the seller offers to the buyer, but the selling price is the price he actually received from the buyer after purchase. Usually the price listed is higher than the selling price. However, the sale price and the specified price or list price may be the same. Fixed price trading is a good example of this. Selling price is a very sensitive issue because the sale of a product is very dependent on it. Any product with a high selling price cannot attract many buyers because consumers do not consider it a good value for money. On the other hand, a very low selling price can affect the company's profitability. In addition, buyers may think the quality is inferior.

2.Why is the selling price an important factor?

Selling price is a key factor for consumers and sellers, because sales and demand for a product are highly dependent on it. Any product with a high or too high selling price cannot attract many buyers because they perceive the value of the product to be disproportionate. On the other hand, a very low selling price can affect the company's profitability and can also indicate lower product quality. Thus, the selling price must be determined correctly based on market analysis and consumer demand.

3.How should the seller determine the selling price?

The selling price can also be called the standard price, market price or list price. Certain factors help institutions and traders determine the selling price of their products:

  • The price consumers are willing to pay

  • The price that is ready to be accepted by the seller/store owner

  • Competitive market price

Depending on the nature and availability of the business, the seller may choose one of the above factors over the others. However, the seller can also use the average selling price of a product to determine how much they should charge their product.

4.What is the average selling price?

Average selling price is the number of products in a given category sold by different channels and markets. This price setting can also be used as a barometer for companies that need to determine the selling price of their products. Knowing in detail about the selling price and determining the exact selling price is very important because the seller needs to keep certain things in mind while fixing the price. To know in detail about the selling price and its formula, you can visit the Vedantu website where you can get appropriate materials on the Selling Price.

5.What is the difference between the selling price and the listed price?

The cost price, also known as the list price, is the price the seller gives to the buyer, but the selling price is the price the seller actually receives from the buyer through an agreement or contract. The selling price is usually lower than the listed price. Sometimes the selling price and the listed price can be the same. A fixed price trade, meaning that a trader does not offer a discount or price reduction, is a good example of this.

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